Does the Small Business Deduction limit of 500K mean 500K in income or 500K in profit for the person?
Sorry for all the questions lately. Posting on behalf of sibling again
Does the Small Business Deduction limit of 500K mean 500K in income or 500K in profit for the person?
The person in this situation is a physician with a professional corporation. Which of these 3 understandings is correct?
Situation: Physician makes 800K income in their medical professional corporation. They pay themselves 200K in salary/income. Their corporation has 100K in expenses.
Understanding 1: They lose the SBD since their income was 800K (over 500K). Their SBD income is considered 800K.
Understanding 2: They keep their SBD and for purpose of SBD their income is considered 400K (due to 100K in expenses)
Understanding 3: They keep the SBD and for purpose of SBD their income is considered 400K (the 100K expenses is not counted).
Or maybe all of these options are wrong.